What’s Next for Obamacare?

Not so benign neglect, probablyMar 27 2017

The collapse of Republican attempts in the House to pass repeal and replace legislation leaves the Affordable Care Act standing, but for how long? Major insurers have dropped out across the last year and a half, citing the low enrollment of the young leaving them with the high cost of paying for the old. That accounts for the premium price increases for 2017 that averaged 22% for insurance bought on the federal and state exchanges.

Fixes could have and still can be made to elements of the Affordable Care that need adjustment, but since its inception, Republicans have refused to consider any repairs, preferring instead to vote for repeal in the House some sixty times. Their objection has always been ideological: that the subsidies and Medicaid expansion are yet another entitlement; that no one should be required to pay for something they don't want. The problem is that these conservative principles leave the people prey to the staggering costs of health care in the United States. The poorer enter hospitals through the emergency room, the hospitals recover their costs by charging more to patients who have insurance, the insurers raise their rates. Thus, as a practical matter, this leaves the wealthier to pay for the poorer anyway, just by a different route. Better  a system.

The Act was a huge experiment never before undertaken. Criticizing it for not being perfect right out of the gate has been senseless. Perhaps some of the Republicans who could not agree even on their much simpler version may have come to that realization. Donald Trump did, although not aware that he was speaking only for himself when he said, "Nobody knew that healthcare could be so complicated", when everyone knows how complicated it is.

Having tried to force through repeal and replace in less than three weeks, whereas the Affordable Care Act took a year and a half, Trump looked to blame everyone else:

But of concern is his attitude that he seems content to watch Obamacare "explode":

Between insurance subsidized and bought on the exchanges, and the expansion of Medicaid in those non-Republican governed states that opted for it, over 20 million people currently benefit from the Affordable Care Act (ACA). Many of them from his "base", and they would be harmed by the irresponsible inaction of letting it "explode".

In fact, we may see this administration take a number of steps to hasten Obamacare's end. On his first full day in the White House, Donald Trump signed an executive order that effectively told all federal agencies to be lax on enforcing provisions of the ACA. That could lead to expanded waivers exempting people from having to pay penalties for not buying insurance. It coud mean slowing the acceptance of applicants to Medicaid. Slowing the approval of subsidy processing.

Perhaps it was only a gesture by Trump to prove to his following that he will deliver on his promise “to minimize the unwarranted economic and regulatory burdens”, as his order says, on the road to dismantling Obama's major achievement. But that having failed, the executive order is the one thing left standing. Given language that is more than a suggestion, telling them to “waive, defer, grant exemptions from or delay”, the agencies may think they had better take action or have to answer to Trump why they did not.

starve the beast

As Congress moves to tax reform, it is sure to rescind the ACA's extra taxes on individuals  the 0.9% extra Medicare impost on incomes over $250,000 for marrieds, and the 3.8% surtax on investment gains. In the process they are likely to get rid of all the other Obamacare taxes  the tax on the health insurance industry that will otherwise bring in an estimated $144.7 billion over 10 years, the $19.6 billion tax on medical devices  there's a list of some 21 taxes meant to help pay for Obamacare subsidies that help people pay for health insurance.

These rollbacks, barely apparent to the public, will make the highly visible cost of the ACA all the more untenable and made to appear part of Obamacare's intrinsic failings and, of course, the Democrats' fault.

To listen to the President, premium costs will rise again by double digits next year, but the unrepaired fault is that the penalties to people who wouldn't buy into the pool didn't take effect until 2014, were set far too low, and have now reached their maximum at only $2,085 for a family of three or more. Sounds like a lot, but given the runaway cost of health care in these United States and the insurance prices that must keep pace, the penalties are a bargain. Moreover, they do not rise as premiums rise, making it ever more advantageous  financially  to pay the penalty rather than buy insurance.

coup de grâce

Looming in the background is a lawsuit that would extinguish Obamacare for certain. In May of last year a federal judge ruled in favor of a House of Representatives suit against the government that says the subsidies the health act provides to help people buy insurance are illegal because the House never appropriated the money. The suit argues that funds meant for other purposes were misappropriated. The subsidies continue pending appeal, but the Justice Department is under new management and may decide not to defend against the suit. If allowed to go forward, without subsidies, Obamacare's insurance market will vanish.

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1 Comment for “What’s Next for Obamacare?”

Concise, clear and profoundly depressing. Ironically, given the great expense of ACA, it doesn’t cover dental needs, something that causes widespread suffering or else loss of a vital function – chewing and enjoying food.

We are the only industrialized country not to have health care, but all those others initiated theirs when, rather than costly life saving procedures, people simply died, so medical care was maybe five percent of their GDP. We could have done it too, when first proposed by Truman, maybe even when Nixon tried, but now we have ways to treat the chronic diseases of old age, but for great cost over many years.

The free market is still the best way to allocate scarce resources — a truism that is hard to apply to life and death services. We do not provide fire and police services based on ability to pay, but the reality is that to provide state of the art medical care to all just might require not the current 15% of GDP, but more like 30%, which simply isn’t tenable, since people also need food, shelter, infrastructure etc, etc.

With realty being some approximation of the preceding, we are left with Sanders-like anodyne solutions, or the Freedom Caucus answer of “let the poor die.” It’s not only that Trump is stumped, but so are those who really think about this challenge.

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